Sep 13, 2012
Fitch Affirms Large Equipment Lessor Ratings
Fitch Ratings has completed a peer review of five rated large
equipment lessors, resulting in the affirmation of the long-term Issuer Default
Ratings (IDRs) of International Lease Finance Corp. (ILFC), AerCap Holdings N.V.
(AER), Aviation Capital Group (ACG), BOC Aviation Pte Ltd (BOC Aviation) and
GATX Corp (GATX).
All of the ratings have been affirmed. Company-specific rating rationales are
described below, and a full list of rating actions is provided at the end of
this release. The Rating Outlook for all issuers is Stable.
Long-term credit fundamentals in the aircraft leasing industry are being
supported by a number of factors, including growth in global air travel demand,
capital constraints among the world's airlines, and the aircraft technology
replacement cycle. Despite near-term risks in the airline operating environment
(particularly in Europe) and threats to the global economy, Fitch expects
lessors to benefit from longer term growth opportunities and improved access to
capital as the structure of the industry evolves.
Improved access to capital, particularly in the unsecured debt market, is
supporting the growth plans of both incumbents and new entrants in the global
aircraft leasing market. Many stand-alone aircraft lessors have improved their
leverage profile over the last several years in an effort to diversify funding
sources. However, certain areas of the debt market, such as securitization, have
remained dormant since the 2008 crisis.
While long-term trends are favorable, aircraft lessors continue to face some
near-term issues. Market values and lease rates on some popular aircraft models
(such as A320s) remain soft, which has affected profitability of some issuers.
The low interest rate environment has put pressure on lease rate factors, which
tend to stay fixed for a number of years for many lessors. The lack of growth in
the global economy as well as uncertainty in Eurozone countries will continue to
impact the airline industry. The price of fuel, which remains elevated, is also
likely to continue pressuring airlines' profit margins.